Alex Edmans, Katharina A. Lewellen, Vivian W. Fang – Monday, December 18, 2017

This paper studies the link between real investment decisions and CEO’s short-term stock price concerns. It finds that vesting equity induces CEOs to reduce investments in long-term projects and to take actions that increase short-term stock price. More broadly, it shows that that the structure of CEO compensation has a causal effect on real-world decisions.